What’s Apple’s Biggest Challenge: Replacing Steve or Wall Street?

Summing Up: Steve Jobs' influence on Apple is pervasive--maybe too much so. Jim Heskett's readers think Apple faces an almost impossible task in replacing the visionary founder.
by James Heskett

Summing Up

The first impression I get from respondents to this month's column is that Steve Jobs can't be replaced as CEO of Apple by just one person. Rather the succession must include at least a head of design (according to Yadeed Lobo) to go along with Tim Cook, the new CEO, and "a logistics man," according to Miles Harris. Of course, if this were even feasible, it would pose difficult challenges to the continued success of Apple.

Tom Dolembo's advice is "Go to Stanford, Alondra Hall… Go to Harvard (College, not HBS)… find a sophomore with out-of-the-box ideas, graphics training, and a master touch with the iPod world, and ceaseless curiosity…. Put them in the same room, watch what happens…. Get out of the way." Whatever else is needed, C. J. Cullinane suggests that "Jobs will have to be replaced by a very visible management team…I think they can do it but it will be a tough task."

A second line of thought is, as Khurt Williams commented, "Apple's biggest threat is Wall Street fickleness and incessant focus on growth."

Others felt that it is impossible to sort out whether the biggest challenge facing the company is replacing Steve Jobs or facing down the pressures of investors and Wall Street analysts. As Gaurav Goel puts it, "Steve's successors would need courage and confidence to do things differently." In particular, there will be a critical period until the new leadership establishes the trust and confidence needed to pursue opportunity and successful new product development in spite of investor impatience.

The real challenges may lie elsewhere, for example "the market place," as Jasper Ojongtambia suggests, or competition from companies like Google and Microsoft, according to Philippe Gouamba. As he says, "Apple's problem is that its detractors are many and they are gaining in strength … This in turn will force Apple's new leaders to take chances that it would not otherwise take."

In total, significant questions were raised about the future of the company under new day-to-day leadership, regardless of Jobs' presence as Chairman. Clearly, the challenge is magnified by the company's extraordinary accomplishments and market valuation, creating expectations that may be impossible to meet in the long-term future. It begs the question, Will Apple be the world's most valuable company five years from now? What is Apple's post-Jobs future? What do you think?

Jim Heskett's latest book,The Culture Cycle, was published in September.

Original Article

Discussions of management succession have been triggered once again in boardrooms around the world by Steve Jobs' decision to relinquish his job as CEO of Apple. Regarding Apple, of course, the question is what will Jobs' withdrawal from day-to-day decision-making mean for its future?

If leaders often become "cult heroes," to use a term coined by Jeffrey Sonnenfeld, Steve Jobs is the cult hero's cult hero. The assumption (not Sonnenfeld's) is that cult heroes are unique, one of a kind, impossible to replace, and that succession is the biggest challenge facing any company led by one. But is this the real problem confronting the company with the departure of a Steve Jobs?

Apple watchers cite several important contributors to the company's success:

  1. Its product development relies less on finding out what customers want than it does on what its employees think would be "cool."
  2. Its strategy is based on the introduction of a stream of thoroughly tested and proven products and new models, all based on a common platform, that often cannibalize each other, and that are simple, elegant, and easy to use.
  3. It borrows good ideas from organizations such as Xerox and Gap but practices secrecy with its own ideas.
  4. Its strengths and interests reflect its cofounder's interest in hardware, not software. Possibly as a result, it relies heavily on partnering with others in the development of application software.
  5. Its product development is organized around sometimes competing teams operating under a regime with the philosophy that "The system is, there is no system … (as opposed to discipline and) great processes," as Jobs puts it.

All of this has occurred under the leadership of a person who practices hands-on management, sometimes personally making detailed decisions. Jobs' influence on Apple is pervasive. As one visitor observed, designers are the most respected people in the organization at Apple as opposed to Microsoft where the technical people rule.

In some respects, Apple's experience with Jobs has parallels with Starbucks' history with Howard Schultz, also a hands-on, detail-oriented leader who created the innovative concept of a "third place" outside the home and workplace where customers could enjoy an experience that included great coffee. However, after he stepped away from the CEO's job, Schultz watched apprehensively as new competitors entered the market and his successors succumbed to Wall Street's expectations for even greater success than Starbucks' had enjoyed under Schultz. Wall Street demanded increasing growth, internationalization, better productivity, and new products. And Schultz's successors responded by opening up to five new stores per day; extending business to many new foreign markets; introducing a faster, higher capacity espresso machine that, because of its bulk, created a barrier between the barista and the customer; and offering new products ranging from new breakfast items to stuffed toys. In 2008, Schultz had to step back in to save the company.

This raises the question of whether Tim Cook, Jobs' successor, has anything to learn from the Starbucks experience? Is Apple's biggest challenge that of replacing Steve Jobs or is it that of resisting the inevitable pressures from competition and Wall Street? Just how are those pressures resisted? And at what risk? What do you think?

To Read More:

Jeffrey Sonnenfeld, The Hero's Farewell: What Happens When CEOs Retire (New York: Oxford University Press, 1988).

    • CJ Cullinane
    The replacement of Steve Jobs will be very difficult for anyone no matter how effective they are. Mr. Jobs is an icon, a legend and part of the Apple mystique. Having said that, I feel that competition and the economy will be the main factors that influence Apple. Most of us realized that Mr. Jobs would eventually leave Apple and I am sure the company prepared for that eventuality.

    The excellent team of Designers and Marketers at Apple will still be there but the driving force for innovation will have to be replaced. The very visible Mr. Jobs will have to be replaced by a very visible management team, on the floor and in the marketplace. The stream of new innovative products will have to continue without pause or the competition will pull ahead of them. I think they can do it but it will be a tough task.
    • Ravindra Edirisooriya
    • Senior Accounting and Finance Major, Missouri Southern State University
    Professor Heskett 's question, "What's Apple's Biggest Challenge: Replacing Steve or Market Pressure?" is a no-brainer if one had paid attention. It is Steve! Simply put market cannot put pressure on Steve if he would make day to day decisions, until he makes a market shaking mistake perhaps the way HP (touchpads) did recently. Would Steve make such a mistake? Given the way Steve developed (unique or not?) his products, statistically, it is a very likely event to make a market shaking mistake given the string of recent big time successes he has had. Steve is not known to do market research, assembling consumer panels and he was neither moved by market news nor popularity. No product passed through Steve's hands to the apple community unless he was convinced that it was the best in comparison to his extraordinary high standards of Apple products (quality, size and capabilities). Yet there was an "Antenna-gate" an
    d Steve simply said "I am not perfect" (and deal with it). Steve loved the act of creating Apple products so much that he did not even ask for the full price of his entrepreneurship to be paid as the CEO (unlike CEOs of most other companies) of Apple. Does Steve have no greed? Steve is accused of not being generous but who could blame him for not handing out donations? Probably, Steve had no time to think how he would meet his social obligations but now he may.

    If Steve would not even blink an eye (which is unlikely given his passion for creating new products) on the development of new Apple products, Tim Cook who is an extraordinary manager himself will have a hard time avoiding the market pressure because he is simply not Steve!

    Unlike Steve, some of our politicians watch polls and seek office /seek to retain office by all means sometimes before country: I will bring back $2 a gallon gas, I will create 11 million jobs, I will lead the way I am led by my cohorts, I pledged no new taxes (to a talking head) which was more important than the debt ceiling, it was OK to lose 2+ trillion dollars of market capital in two weeks by way of an "uncertainty tax" just because no new taxes was the ingrained party line, "social security is a ponzi scheme", I will meet constituents by invitation only (because I do not want to hear an earful) in our democracy, I will not reduce smog if it hurts business. It was well said "stop the political circus and do something to help the economy" and "doing nothing is not an option" and thank goodness for leading the way and we the people will hold the politicians accountable! Today, the economy /job creation is more of a political football
    for some politicians and winning the game (elections) for themselves and the party is what matters more to them, sadly.
    • Gaurav Goel
    • DGM, RCom
    I think that the success of Apple can be attributed to the most basic rules of business. Steve brought very high quality products for his customers and could keep a tight control on the logistics by offering a limited number of variants of apple products.

    His products evolve by simple and incremental innovations that minimize possibility of any bugs being part of the rolled out products and also ensure quick and seamless adaptation by consumers.

    Brilliant elements of marketing in all aspects of product development and market communication make his products desirable for multiple customer segments. I am still amazed by the idea of a white earphone wire becoming a symbol of trends.

    Though Steve followed the basic principles of management, he had vision and confidence in himself to avoid the pitfalls of "market" prudence. I feel that it was courageous of Steve to offer products with limited functionality and limited choices to customers in order to keep things simple and scalable.

    Market wants the best returns with least risk. Investors want the organizations to operate in proven ways, that's why they are investors and not entrepreneurs or innovators. Steve's successors would need courage and confidence to do things differently. They would need vision and execution skills to keep innovating and building upon the great platform of iTunes.

    I think that the greatest of apple products is the iTunes. It has changed the way many industries used to operate and it has potential to shape the future in many ways. Though apple is known for its great hardware, in my opinion their ownership of the iTunes platform and their ability to keep on leveraging this platform would decide if they would continue to influence that how we spend our time on this planet.
    • Phil Clark
    • Clark & Associates
    If they do not get another great leader, Wall Street will destroy Apple. Ravindra Edirisooriya hit a number of reasons why Steve was successful. The new leader must be able to allow the talent at Apple to explore and be successful. I have no faith that Wall Street can promote and support the innovation and life changing technologies that Apple has brought to the world. The lesson for investors is...do not put your money into companies that you do not want to support. Just because you put your dollars in does not give you any right to make decisions about the company. If you do not like the way a company operates, sell your shares and keep your mouth shut. Sorry for the bluntness but over the past 50 years I have seen too many good companies destroyed by Wall Street investors.
    • Khürt Williams
    • Information Security Professional
    I think a quote from Gaurav Goel above says it best:

    "Investors want the organizations to operate in proven ways, that's why they are investors and not entrepreneurs or innovators."

    Apple's biggest threat is Wall Street fickleness and incessant focus on growth.
    • Yadeed Lobo
    To churn out successful products with the overt scrutiny of the world press and in intensely competitive environments requires someone who embodies a paradox. Intensely micromanaging about detail but open to radical new ideas and change.

    Micromanaging the finesse around product lines would suggest left-brain oriented and numbers domination. Open to disruptive ways would mean right brain activity. Does the new CEO embody that? Possibly, along with the Head of Design they could perhaps create magic (iPad successors) again.

    It is certainly helpful that Steve is the Chairman. Board papers and discussions provide the extra layer of oversight and experience, which would be needed, for the CEO not to repeat the temptation of moving from a product leadership to an operational excellence paradigm.
    • Jasper Ojongtambia MS,MBA,MFE
    • President/CEO, AEC Computer Division
    It is my opinion that Apple's biggest challenge will not be Wall Street but the market place. The expectation that Apple will keep up with the pace of products innovation and development as Mr. Steve hands over the day to day operation of the company.
    The leadership team at Apple should hopefully run the company well after all the years of preparation for Mr.Jobs departure.
    Hence, keeping customers happy with simple to use friendly and innovative products is their challenge.
    • Kapil Kumar Sopory
    • Company Secretary, SMEC(India) Private Limited
    There is an old saying, "THe king is dead, long live the king." We wish exact parallel could be found in business. It is not so as experience shows a great leader ultimately is what matters. And, a multifaceted leader is pretty hard to be replaced as a match does not exist. And, it may becme unavoidable to replace one by many more.
    Steve Jobs was many CEO's in one. We remember him for his innovative spirit ( creating new products), Human emotions ( he came from a humble background being adopted son of working class parents; exhorted students to "stay hungry, stay foolish"; one who made geeks feel cool and showed to the world that it is fine to wear your vulnerability on your sleeves than show false strength. Jobs also possessed highest common sense, shouldered complete responsibility and created cult value.
    Apple may not remain the same eventhough Jobs wrote in his exit letter, " I believe Apple's brightest and most innovative days are ahead of it...." . He also assured that he would be looking forward to watching and contributing to Apple's growth... This should be an encouraging comment for Job's successor(s) who have a tough time ahead to continue the growth as it was with Jobs there.
    • Tom Dolembo
    • Founder, New North Institute
    I offer an alternate vision:
    1. Go to Stanford, Alondra Hall, find a sophomore with out-of the box ideas, graphics training, and a master touch with the Ipod world, and ceaseless curiosity.
    2. Go to Harvard (College, not HBS), do the same, try Quincy or Winthrop House.
    3. Put them in the same room, watch what happens.
    4. Get out of the way and let these two find room at the top of Apple.
    5. Apple, following the 5-step scenario you offer up in the above, is dull as dishwater. The customer has defined Apple, Jobs was joined at the cranium with them. Look to your psychographic, not some moth ball smelling old traders stuck in the attic. They'll follow the money.
    • Philippe Gouamba
    • Vice President of Human Resources, Skyline Windows, LLC
    "If they do not get another great leader, Wall Street will destroy Apple." writes Phil Clark.
    I hate to disagree with Mr. Clark as I do feel that he is mostly correct in that Wall Street will eat Apple up if they are not lead by a great leader but Apple has greater foes than Wall Street. Ubiquitous Google, a technology juggernaut if ever one has existed is Apple's biggest threat. Microsoft is also still a relevant threat to Apple. With so much open source technology and its rapid growth, as high-tech and forward thinking as Apple has been and still is, Apple has a huge target on its back, and those taking aim at Apple are coming at it from all angles. I think Apple will always have its supporters, including investors. Apple's problem is that its detractors are many and they are gaining in strength and in numbers and in computing talent. This in turn will force Apple's new leaders to take chances that it would not otherwise take. Heaven help them if they make a faux-pas. Hungry predators are nipping at Apple's heels. Wall Street is a distant third or fourth-line concer
    n at this stage of the game.
    • Miles Harris
    • Managing Director, Fresco Limited
    To the surprise of investors, who are mainly left brain types, Apple, a rightbrain designer company, makes Microsoft's left brain culture look lame. Starbucks seems to have suffered from losing it's human-centric philosophy. Tim Cook seems to be a logistics man. Not a good sign for Apple perhaps but SJ has always had a great knack of recruiting winners
    • Srinivasan
    • Director, Hewlett Packard
    I believe it's both and it's neither (Looks a self-contradictory statement) - but I will explain my perspective.
    It's both because:
    1. Steve with his ruthless focus literally made Apple synonymous with him. So to replace him (with a huge cult following) is not practical. Such leaders don't appear every day; and it would be foolhardy for anyone to mimic and try to get into his shoes.
    2. Wall Street - because it's success leading to more success. So the positive vibe that got created ensured quarter after quarter; product after product; release after release - was being eagerly awaited resulting in a huge multi-bagger.

    The reason I believe it's neither:
    1. Apple has taken the approach of high risk-high reward. It has very limited things it offers (SKU) and brings very few products to market successfully [The museum approach].
    This has played very well in the last decade. There will come a time when somewhere the risk will materialize; and a couple of them in sequence - the whole perception can change...
    • Ajay Kumar Gupta
    • Doctoral Researcher and Faculty(ITM), Tata Institute of Social Sciences, India
    Apple's biggest challenge is to meet the expectation of wall-street and customers both. It needs to strike a balance between expectation and its core strength. Any deviation from core to meet expectation could harm the company. This may compel company to compromise with its core strength and thus failing expectation. I think, between Wall Street and customer, Apple should focus more on customers and less on Wall Street. Customers create wall street and not otherwise. Customers have emotions, Wall Street does not have. So, Apple needs to emotionally engage, connect and satisfy customers' expectations. They will automatically manage Wall Street.
    Other challenge is to maintain and restore customer trust. Apple should follow the same path what Steve Jobs has followed in terms of idea conceptualization, a system of no system, borrowing best ideas, learning from others experiences etc.
    I think customers view Apple as a company of innovation, understating customer need and timely offering products at competitive price with unmatched features. This is reality than perception and company should maintain the same reality in customers mind. Perhaps the greater challenge is to offer the products and services to customers before competitors offer. The products and services should surprise and create a feeling of happiness and satisfaction in the mind and heart of customers. Apple needs to create emotional connectivity with customers. To do this successfully, they should feel the customer need, demand and problems. To cite an example of Toyota, it recalled 8.5 million cars due to faulty accelerator. It increased Toyota reputation and customers trust many fold. So, learning from experiences of other companies could be powerful strategy to remain uncompetitive.
    Apple should continue maintaining ethical and accountable practice in all its activities. It should continue believing in quality than quantity. Apple core is its unique products, unmatched services, innovative features, ethical practices, providing positive surprise to customers and it should continue believing it. Market share, revenue growth, profitability is just game, and apple should not focus on this game. Its core will take care of this game.
    • Santhanam Krishnan
    • Saraswat Bank
    Dear Professor Heskett

    The key question to be answered is , who is more important - the creator or the created? And what is the intention of the person who creates an entity? If these questions are clear in the minds of the creator or co-creator perhaps the situations such as the one faced by Apple may hardly arise. One of my seniors in business taught me a golden rule - if you start an enterprise your presence should be felt, not your absence. Herein lies the vision of the creator/s.

    Fortunately there are several visionaries the world has seen in the past decades - both in business and other spheres. Creative visionaries create the culture of sustaining continuance of their creations even long after they leave the scene. Let me share a recent example of Infosys Limited - one of the globally well known Indian Software giants, listed in the NYSE - whose chief creator Mr. N.R. Narayana Murthy laid down his office after more than three decades of nurturing his creation along with co-creators. Though it is too early to come to any meaningful comment, the way the baton has been handed over to his successor, leaves little doubt about his intentions. (Perhaps he was alive to the pressures of Wall Street!). Such actions of the creators also tell us about the personal value system of the creator.

    It is also seen in some cases of creative geniuses who create entities, that they are paralysed by their own creativity bug and their creation becomes a casualty! Perhaps a competent and a positive creator is one who leaves his thought prints in the grey matter of his successors they need not have to worry about Wall Street or any other future street!

    (Views expressed are personal. Not in anyway attributable to the organization to which the contributor belongs.)
    • Anonymous
    Let us put this in perspective. As one man said, for all that he has achieved, it does not matter who succeeds Mr Jobs, whether he be a dork or a skilled CEO. So to answer, whether by Wall street or CEO, it does not matter the challenge, Apple and all Mr. Jobs has done will come to a useless flow.
    • Walter P. Blass
    • President, Stfrategic Plans UnLtd
    Jim Heskett has answered his own question: Leadership is # 1, Wall Street will surely judge a firm on its accomlishments rather than on its pizzazz. You can't judge a car's performance by what comes out the tailpipe, but how efficiently it does its primary tasks. You saw very clearly that HP's Board couldn't pick the right CEO already with the "punting" they did by selecting Lew Platt, followed by Carly, Mark Hurd, Apotheker; Meg Whitman's capabilities there remain to be seen. As we have seen in American politics, Life is very unforgiving when you pick the wrong leader!
    • Jay Somasundaram
    • Systems Analyst
    Is it Jobs or is it the market. Free marlkets reward success, unconcerned by whether it is by luck or by design. We operate with hindsight, ascribing specific strategies to individuals. Apple has had its ups and downs, just as other players in the technology market have. While it is debatable whether Apple needs Jobs or not, what is certain is that the technology market does not.